How to Calculate Stamp Duty for Gift Deed?

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When a property is gifted to any person, several legal rules and procedures need to be followed. If you are staying in a city like Mumbai, it is all the more important to understand the gift deed stamp duty Mumbai. One must understand the legal implications of buying a property. If you don't complete the specific processes that are involved, your gift can get invalidated. One such legal implication is the payment of stamp duty which is an important step in claiming ownership of the gifted property.

What is a Gift Deed?

A gift deed is a legal document that gives details regarding the voluntary transfer of a gift from the donor (i.e. owner of the property) to the donee (i.e. receiver of gift) without any compensation or favor in return. A gift deed can be made for both movable goods as well as immovable assets. A gift deed for an immovable property involves the gifting of some immovable property like a house. Similarly, a gift deed for a movable property involves the gifting of movables like a car or cash. A gift deed describes every detail of the transaction as necessary by law. If you share a property in India then you even need to make a decision on the division of property by divorce.

Features and Essentials of a Gift

1. Transfer of Ownership: A valid gift requires a complete transfer of property rights from the donor to the donee.

2. Property in Existence: Gifts of future property are not valid. Gifts must involve existing movable or immovable property. For example, one can gift their share obtained after the partition of joint family property.

3. No Consideration: Consideration means monetary consideration and does not involve love and affection. The most important aspect of a Gift is that the donor does not take any monetary benefit/consideration from the donee in return for the property gifted. If any consideration is a part and parcel of this situation, then, it would be a sale and not a gift.

4. Free Consent: A voluntary transfer of ownership of the property should be made and the consent of the donor should be free and not under any undue influence or force or fraud. Even in case of a mutual divorce , If there is a gift under any coercion or undue influence, it would not be a valid gift.

5. Donor's Capacity: A donor should be a major i.e. above the age of 18 and should be of sound mind. A donor should have the capacity to contract and should not be disqualified in any other way. Only then a gift will be a valid Gift transfer.

6. Acceptance of the Gift: The donee should accept the gift himself. Apart from this, it is also important that the acceptance of the gift should be given during the lifetime of the donor when he/she has the capacity to gift.

Features and Essentials of a Gift Deed

1. A gift deed must be signed by the donor or any other person authorized on their behalf: The donor, or any other person whom the donor authorizes, must sign the gift deed. The attesting witnesses must also sign the document in the presence of the donor.

2. A gift deed must be attested by two witnesses: The donor, or any other person authorized on his behalf, must sign the document in the presence of both attesting witnesses. It is not necessary that both attesting witnesses attest to the document at the same time.

3. A gift deed must be properly stamped: It is essential to pay proper and complete stamp duty to validate a gift deed.

4. A gift deed must be properly registered: Section 17 of the Registration Act, 1908, governs the registration of the gift deed of immovable property. The registration must be done in the presence of the Registering Authority after the registration fees have been paid. Registering the gift deed of movable property is optional.

However, knowing the features of a Gift Deed is not enough if you really wish to verify the validity of a deed. Get in touch with a top-ranking property lawyer in your own city with the help of LawRato's Talk To A Lawyer, or Free Legal Advice service.

What are Stamp Duty and Registration Fees?

Registration fees and stamp duty are charges levied by the government on certain transactions related to immovable property. These charges vary from state to state in India, and they are regulated by state-level laws and regulations. Stamp duty is a tax levied by the government on the transfer of property or assets. A physical stamp is attached or impressed on the legal document for the transaction of property that denotes that tax has been paid. When a property is gifted to you mere physical possession is not sufficient. You also need to have legal evidence of ownership of the property which is done after paying the registration charges and stamp duty. Stamp duty is usually a percentage of the transaction value and is paid by the buyer or the transferee of the property. The purpose of stamp duty is to validate and authenticate the legal documents related to the transfer of property and to prevent fraud and disputes.

Stamp duty is levied and collected by the state government. It is the direct tax that is payable under section 3 of the Indian Stamp Act, 1899 on all documents of financial transactions including bills of exchange, promissory notes as well as property transactions. Stamp duty charges vary from state to state. Registration fees, on the other hand, are charges for the registration of the property transfer documents with the government authorities. This fee is usually a fixed amount and is paid by the buyer or the transferee of the property. The purpose of registration fees is to ensure the legality and validity of the transaction and to maintain records of property ownership. Both of these charges are paid by the buyer or the transferee of the property.

Consult: Top Property Lawyers in India

What are the Documents Required?

• ID documentation is required to confirm the identity of the donor and donee (such as an Aadhar card or driver's licence).
• Document Establishing Ownership (such as a Sale Deed or Title Deed): Establishes the legal ownership of the donor.
• Passport photographs of both the parties: Usually necessary for record-keeping.
• Address proof: Confirms the identification and place of residence of the witnesses in question.
• Copy and Originals of Required Documents: To comply with legal requirements, copies and originals must be provided.
• NOC: It is essential for deals involving the sale of agricultural land. (No Objection Certificate).
• Affidavit Validating the Deed: Required by the Registration Act of 1908 to attest to the legality of the deed.
• Encumbrance certificate: A property's outstanding encumbrances must be verified using the encumbrance certificate.
• Purchase Agreement and Index II: Show the history of transactions involving the property.
• Electricity Bill: A must-have for the property as proof of address.
• Property tax bill: This shows who owns the property and how much taxes are owed.
• Society registration certificate: For homes within housing societies, a society registration certificate and a society share certificate are required.

Gift deed stamp duty in different States

Stamp Duty & Other Charges for Gift Deed of Residential or Agricultural Property

The application for stamp duty and other charges for gift deeds can divided into three broad categories. The details of this differentiation are provided below. Gift Deed in Favour of Immediate Family: There may be advantageous stamp duty exemptions or lower rates when making a gift deed for residential or agricultural property in favour of immediate family members including spouses, children, grandkids, or the wife of a deceased son. These exclusions often result in lower overall expenditures and are frequently created to assist property transfers within the family. Gift Deed in Favour of Extended Family or Non-Relatives: Stamp duty exemptions may be less advantageous when giving property to relatives other than the immediate family, such as fathers, mothers, brothers, sisters, grandfathers, grandmothers, or daughters-in-law. These gift deeds may have higher overall expenses because different jurisdictions may have different rates and exemptions. Gift Deed to Non-Family Members: Standard stamp duty rates, which are frequently higher than those for intra-family transfers, are normally applied to gift deeds involving non-family members. Such transactions may also be subject to registration costs, transfer fees, and legal charges. These regulations were put in place to prevent the transfer of property to unrelated parties and to make sure that the government gets properly compensated for those transactions. While it's a popular opinion that gifts between blood relatives are exempted from stamp duty, it's crucial to note that some relations, like son/daughter, grandson/granddaughter, and spouse (husband and wife), fall within the first category and are fully exempt. However, in the case of a Son or Daughter who wishes to write a Gift Deed in support of a Father or Mother, there is a partial stamp exemption. Charges for Gift Deed of a Commercial Property The charges for gift deeds of a commercial property vary from state to state. However, usually, for commercial property, there is no exemption from stamp duty and registration fees. The same registration fees, taxes, and levies that apply to conveyance deeds (such as sale deeds, deeds of assignment, agreements for sales, etc.) also apply to gift deeds for commercial property. e.g. If the property is located in Pune or Pimpri Chinchwad Corporation area then 5% Stamp Duty + 1% LBT + 1% Metro Cess + 1% Registration Fees will be applicable. These charges shall be calculated on the Government Value of the property.

Such calculations can be burdensome for both the donor and the donee. Advice from a property lawyer can ease the process and help you calculate the exact amount of stamp duty for your gift. Talk To A Lawyer or get Free Legal Advice, at LawRato you can do both in an easy step.

Why do you have to pay Stamp Duty?

A stamp on the gift deed for transferring the property is a legal document that proves your ownership in court. Without paying stamp duty, one cannot legally claim the gifted property. Thus, you need to pay the full stamp duty charge to claim ownership.

What are the Factors affecting Stamp Duty in India?

As mentioned above, stamp duty varies from state to state. However, there are certain factors that determine the amount of stamp duty that has to be paid by the person.-

• Location- Different areas have different stamp duty rates. For example, if your property is located in a municipal area, you would have to pay a higher rate than a property located in a rural area.

• Age of the building- Since the stamp duty rates are calculated as a percentage of the total market value of the property, therefore, the age of the property plays a crucial role. Old buildings usually attract less stamp duty charges and new buildings attract a high charge. This is because the market values of old buildings depreciate.

• Age of the Owner- Almost all state governments have subsidized stamp duty charges for senior citizens. So, the age of the owner plays an important role in determining the charge.

• Gender of the owner- Just like senior citizens, women also get a concession on stamp duty rate if the property is in her name.

• Purpose- Commercial buildings attract a high stamp duty fee when compared to residential buildings. This is mainly because commercial buildings would need more amenities, floor space, and security features.

How to pay Stamp Duty in India?

There are three ways through which one can pay stamp duty charges to the respective state government-

• Stamp Paper- Executing a transaction on non-judicial stamp papers is a traditional method of acquiring property by paying directly to the registered authority. Both parties have to write down the terms of the agreement on the paper and get it signed. The stamp vendor records every detail about the stamp purchaser and the transaction the details are then mentioned at the back of your stamp paper.

• Electronic Stamping- To avoid counterfeit stamp papers and to make stamping easy, the Government introduced e-stamping. E-stamping basically means the stamping done online. It is a more convenient way to pay stamp duty. In order to do e-stamping, you have to visit the SHCIL (Stock Holding Corporation of India Limited) website.

• Franking-Franking is another process where the stamp duty is paid to the authorized banks which have a franking center. Here, you need to prepare the documents first and then take it to the authorized center/bank which accepts the payment of stamp duty and physically stamps the paper to make it legally existing.

Who is Liable to Pay Stamp Duty on Gift Deed?

In the absence of any agreement to the contrary, the transferee or the donee is required to pay stamp duty. However, an agreement/gift deed could state otherwise. In many sale and gift deeds as well, the stamp duty is decided to be paid by both the parties equally. Stamp papers are to be purchased in the name of either of the parties to the gift, I.e. the donor or the donee, failing which will disable the stamp paper altogether. Stamp paper is said to be valid for a period of six months from the date it is purchased on, only if the duty on it is paid on time.

What is the Penalty of not paying Stamp Duty on the Gift Deed?

Stamp duties are expected to be paid in time. If a document that requires to be stamped is not duly stamped, penalties such as monetary fines can be accrued. A delay in payment of stamp duty will pull in 2% per month to the maximum of 200% of the deficit amount of stamp duty.

Consult: Top Property Lawyers in India

Stamp Duty Rates in major Cities

The stamp duty rates vary from state to state. Here are the stamp duty rates for some major cities-

• Delhi- Delhi's stamp duty rates differ for men and women. For women, the stamp duty is charged at the rate of 4% of the market value of the property and for men, the rate is 6%. For joint-owners (men and women), the rate is at 5%.

• Kolkata- When a property is gifted to a blood relative, the stamp duty charges are at the rate of 0.5% of the market value of the property. When it is gifted to any other person, the stamp duty rate is 5% in panchayat areas and 6% in municipal areas, corporation areas, and urban areas. If the market value of the property is more than Rs. 40 lakhs, then an additional 1% stamp duty is charged in both urban and rural areas.

• Bangalore- The stamp duty charges, when the property is gifted to the donee (receiver of the gift) who is not a family member, is at the rate of 5% of the market value of the property. If the property is gifted to a family member, then the stamp duty charges are fixed-

1. If the property is situated within the limits of Bangalore Metropolitan Regional Development(BMRD) Authority or Bruhat Bangalore Mahanagar Palika(BBMP) or City Corporation, then the charge is Rs.5,000/-.

2. If the property is situated within the limits of the City or Town Municipal Council or Town Panchayat area, then the charge is Rs.3,000/-.

3. If the property is situated within the limits other than the limits specified in points (I) and (II), then the charge is Rs. 1,000/-.

• Mumbai- In Mumbai, the stamp duty fee differs as per the type of the property which is being gifted, such as:-

1. In the case of agricultural and residential land, the stamp duty is Rs 100.

2. In case of any immovable property which is given to a family member, stamp duty is 3% of the market value of the property. If a person other than the family member is giving the property, then, in that case, the stamp duty will be 5%.

• Hyderabad & ndash Hyderabad's stamp duty rates differ as per the relationship of the donor (person gifting the property) and donee.

1. If you gift the property to a family member, then stamp duty is 1% of the market value of the property

2. In the case of any other gift, the stamp duty rate is at 4% of the market value.

• Chandigarh- In the Union Territory of Chandigarh, the stamp duty charges are at the rate of 6% of the market value of the property. There will not be any application fee charged in case the property is transferred to any blood relative within the lifetime of the donor.

• Jaipur- In Jaipur, the stamp duty charges for family and non-family remain the same at the rate of 5% of the total market value of the product.

• ?Chennai- In Chennai, the stamp duty charges for gift deeds for family and blood relatives is at the rate of 1% of the market value of the property, whereas, the rate is 5% when the property is gifted to any other person.?

What property can be gifted?

Movable or immovable property that exists in the present time and is not a future property. Although non-relative property gifting is not recognised by the government, stamp duty is levied on real estate transactions. The scope of property gifts is constrained by Hindu law. A Hindu person may give away self-acquired property, and coparceners may give away their coparcenary stake if certain requirements are met. Sometimes widows will give away a portion of an inheritance, although not in a will. According to Indian law, a property to qualify for a gift must:

• Property can be moveable or immovable
• It needs to be transferable.
• Tangible in nature
• It can't be a property for the future.
• Registered paperwork is required to substantiate the gift of a residence.
• The donor must sign the form themselves or on their behalf.
• The document must be attested to by two witnesses minimum.

Also, it is important to note that gift deeds must be recorded at the sub-registrar's office following the established legal protocol, much like sale deeds.

Legal requirements for gift deed

A gift deed must be registered following the Transfer of Property Act. It requires the presence of a registered instrument or document that has the donor's or their representative's signature and is witnessed by a minimum of two people. The transaction must follow this exacting legal process to be valid legally. Gift deeds must also be registered at the sub-registrar's office following established protocol, much as sale deeds. Necessity of payment of stamp duty When dealing with gift deeds, it is crucial to remember to pay stamp duty and registration fees. During the registration procedure, the registrar is in charge of ensuring that the proper stamp duty has been properly applied to the document. The stamp duty and registration fees associated with gift deeds are typically the same as those for regular property sales. Certain Indian states offer stamp duty reductions when certain close relatives and family members execute gift deeds. For example, in the state of Maharashtra, there is a cap on the stamp duty that must be paid when giving residential or agricultural property to a person's close family, which includes their wives, children, grandkids, or the mother of a recently deceased son. No matter how much the property is worth, the stamp duty is limited to Rs. 200. Similar to other states, Uttar Pradesh has set a Rs. 5,000 stamp duty fee for these gift deeds. This applies to transfers of real estate to kin, including children, grandchildren, parents, husbands, daughters-in-law, real brothers, real sisters, and real nephews and nieces. The overall cost of such transactions is Rs. 6,000, including the stamp duty and an additional processing fee of Rs. 1,000.

The gift comes into effect immediately

The rights to the gifted property are lost after the gift deed is registered, thus owners who are thinking about gifting their property should be informed of this. This indicates that the stipulations of the gift deed, just like the sale or relinquishment deeds, take effect right away. This is distinct from a will, where the provisions only become effective upon the death of the creator. It is crucial to understand that paying the required stamp duty is a requirement for a gift deed to be effective.

Income tax on gift deed

Gifts that a person receives during the course of a year are completely free from income tax, so long as their combined value does not exceed Rs 50,000. However, if the total amount of these exceeds Rs 50,000, then none of the gifts are exempt from taxation. Notably, presents given between families have preferential consideration under the tax code. Gifts of any property, whether movable or immovable, provided to designated relatives are completely and unconditionally exempt from tax in the hands of the recipient. These close relations include the person's parents, spouse, siblings, spouse's siblings, lineal ascendants, and spouse's descendants. In addition, the aforementioned individual's spouse is also featured. When a house is given as a gift by a family member, the first tax repercussion occurs when the residence is sold. The price paid by any of the previous owners is taken into account when determining the cost of a property for income tax purposes. Depending on whether the whole holding period, including that of the previous owner who paid for it, exceeds 36 months, the ensuing gains are classified as either short-term or long-term. The profit from the sale of the property is classified as short-term income, added to the person's regular income, and taxed at the appropriate slab rate if the computed holding period is less than 36 months. A residential property or capital gains bonds issued by the Rural Electrification Corporation (REC) or National Highway Authority of India (NHAI) are two options for the taxpayer to invest in if the holding period is longer than 36 months and they wish to claim exemption from the 20% long-term capital gains tax.

Can you take back your gifted property?

Once a gift has been finalised, it becomes legally binding on the giver and, in most cases, cannot be withdrawn unless it can be shown that the property was taken from the donor through fraud or undue influence. Another circumstance when a gift can be revoked is when a clause is there in the agreement. This has been mentioned in Section 126 of the Transfer of Property Act that if the owner specifies in the registered contract that they retain the right to reclaim the gift, this has to be supported with documentation as well.

Conditions to revoke a gift deed

Establishing a provision or mutual understanding between the donor and the beneficiary that details the instances in which the gift deed may be revoked, such as a particular failure or incident, is essential. The circumstances under which the gift deed may be revoked should be mutually agreed upon by the parties and should not be left simply to the discretion of the donor. Revocation by the donor is not allowed in situations when a contribution was not influenced by fraudulent activity. In these circumstances, both the donor and the beneficiary must seek revocation in court, which is an entirely different process. However, nothing is impossible if you have the right person. Here, LawRato can be that person for you who can help you connect with the best property lawyers who can help you with their expertise. Free Legal Advice on Phone | LawRato

Key points to remember about gift deeds

1. Indian law does not recognise gifts to those who are not relatives as being legitimate. This results from the assumption that, when dealing with non-relatives, a property owner would normally anticipate some sort of consideration. The deed must be recorded as a sale deed in certain circumstances.

2. A donor who wants to revoke a gift deed must show that they were deceived or forced into signing it. The only option for retrieving a gift of property is this.

3. A gift deed must be correctly executed and the transferor must be the property's legitimate legal owner for it to be accepted. There should also not be any court orders blocking such a transfer.

4. When the recipient receives the gift as a result of marriage, inheritance, or through a municipal government, tax duty does not apply to the gift deed. Gifts from trusts, foundations, medical facilities, educational institutions, and other organisations are also excluded from this rule.

Some other tips to execute a gift deed

1. A gift deed is not required when giving mobile property as a gift.

2. It's critical to note in the gift deed that the transfer is being made out of genuine affection and devotion for the receiver.

3. It is advisable to state the purpose of the gift in the gift deed, which may be for the recipient's general welfare.

4. One must also present evidence of the recipient's acceptance of the gift when registering the gift deed.

5. To avoid potential legal issues in the future, it is crucial to consult with your family members before signing a gift deed.

Gift deed myths

One is free to gift your property how they like, but with the following restrictions: Only self-acquired property in which you are the sole owner may be gifted. Ancestral or communal property cannot be given as a gift. Contrary to popular opinion, receiving a high-value gift can result in tax obligations for the recipient. Properties are likely to have stamp duty implications because they are often viewed as high-value gifts. Furthermore, it's significant to remember: Legal property gifts can only be made by those who are emotionally and mentally stable. The gift deed will become void if this is not the case.

Goa to extend lower stamp duty on gift deed to nephews, nieces, in-law

The Goa government has given its approval to an amendment to the Indian Stamp (Goa Second Amendment Bill) 2023, which broadens the definition of family members to include nephews, nieces, son-in-law, and sisters-in-law. In 2021, the state had previously reduced the stamp duty on gift deeds made in favour of family members to Rs 5,000.

Conditions must be met for senior citizens to declare gift deed void: HC

According to the Karnataka High Court, a gift deed signed by an elderly person can be declared void if it stipulates that the person receiving the present must take care of the senior in return. In the case of Nanjappa v. State of Karnataka & Others, this ruling was highlighted. The court emphasised that the provisions of Subsections (1) and (2) of Section 23 of the Senior Citizens Act do not apply because there is no agreement in the document addressing the donee's duty to the appellant (the senior citizen). According to subsection (1) of Section 23 of the Senior Citizens Act, certain circumstances may cause property transfers, whether made as a gift or in another way& mdash to be deemed void.

Why do you Need a Lawyer?

A good property lawyer has the experience and knowledge regarding gift deeds and stamp duty to be paid on them. You can also use LawRato's Free Legal Advice service to get free advice on your case from expert property lawyers. It is therefore advised to consult a lawyer before concluding a gift deed and paying an incorrect stamp duty. An incorrect stamp duty payment can cause future troubles. A lawyer will ensure you are guided in the right direction.

Advocate Chikirsha Mohanty

4.0 | 2+ user ratings Greater Kailash - 1, Delhi
5 years

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